Sri Lanka's Central Bank has suspended sales of precious metal commemorative coins that were becoming gold mines for speculators, an official said.

Sri Lanka's Central Bank has suspended sales of precious metal commemorative coins that were becoming gold mines for speculators, an official said.

Buyers could make a mint out of the eight gram gold coin priced at Rs. 8,000 (US$ 80) when the equivalent gold value in the open market had shot up to at least Rs. 10,000 (US$ 100).

"We stopped the sale of the gold and silver coins pending a revision of prices," the Bank's superintendent of currency, S Wijesinghe, told AFP. "The gold value in the coin is more than the current market price."

A
Sri Lankan man holds an eight
gram commemorative gold coin (L) and commemorative silver coin (R) in
Colombo, 28 July 2004, purchased prior to the Sri Lankan Central Bank
suspending the selling of the coins that have the potential to be a gold
mine for collectors and jewellers

The coin was issued with a face value of Rs. 5,000 to mark the country's independence golden jubilee in February 1998, with a tidy Rs. 3,000 mark up for the Central Bank.

Sales of the coins were suspended last month without fanfare although the Bank's website has continued advertising the commemorative coins at the old price.

The 4,100 people who had bought the Rs. 5,000 gold coin before sales were suspended could now be laughing all the way to the bank, or the jeweller.

The Rs. 1,000 silver coin weighing 28.28 grams has also been held back because the metal value in it is more than the Rs. 1,200 (US$ 12) the bank had been charging.

Jewellers here said a sovereign, or eight grams, of 22-carat gold in the form of a medallion or coin retailed for Rs. 12,000 (US$ 120), while in uncrafted form it costs Rs. 10,0000 -- the "paper gold market" price.

Wijesinghe said he did not expect the commemorative coins to be melted down, but jewellers said it made good business sense -- although no one would openly admit to something that is technically illegal.

The Bank had similar problems with smaller denomination brass coins which have virtually vanished from circulation after enterprising industrialists turned them into screws.

To a lesser extent, the Rs. 5.00 coin is also being taken abroad, especially to London where some vending machines could be fooled to accepting it as a one pound coin. (AFP)